Home » Consolidated Communications » Recent Articles:

Hedge Fund Successfully Pressures FairPoint Communications to Sell Itself

fairpoint greedAn activist group of shareholders led by a hedge fund has successfully pressured executives at FairPoint Communications to sell the company to maximize shareholder value.

The buyer, Illinois-based Consolidated Communications Holdings, Inc., said on Monday it would acquire FairPoint in an all-stock deal worth $1.5 billion, debt included.

The buyout will enrich certain shareholders and hedge funds, including Maglan Capital’s David Tawil and Steven Azarbad, who blasted FairPoint CEO Paul Sunu in a letter sent earlier this summer complaining “shareholders have been extremely patient with the company’s operational turnaround and have suffered because the board has not been vigilant in protecting shareholder value.”

Maglan will cash out its investment initially made after FairPoint went bankrupt, when the share price was below $4. As of 4pm this afternoon, FairPoint stock was trading at $18.85 a share, less than the $23 a share and 75% premium Tawil and Azarbad were hoping for back in August. But they will still walk away earners, selling at around $18 a share plus an additional 17.3% premium. Collectively, the two hedge fund managers control 7.6% of FairPoint’s shares.

consolidated-communications-logoConsolidated Communications will inherit residential FairPoint phone and broadband customers in 17 states, most notably those in Maine, New Hampshire, and Vermont. But press releases from Consolidated showed little interest in the residential telecommunications business. Instead, Consolidated executives are looking at FairPoint’s business and enterprise customers, and the benefits of owning FairPoint’s 17,000 fiber route mile network.

Critics suggest the deal effectively enriches shareholders while putting FairPoint’s existing debt and buyout on the new owner’s credit card. Consolidated will inherit $887 million of FairPoint’s current debt plus the $1.5 billion cost of the acquisition.

The combined company will keep the Consolidated Communications name and FairPoint Communications as a brand will eventually disappear if regulators approve the transaction sometime in 2017.

Consolidated Communications currently serves residential phone customers in:

  • Suburban/Exurban Sacramento, Calif.
  • Fargo, N.D.
  • Mankato, Minn.
  • West Des Moines, Ia.
  • Suburban Kansas City, Kan.
  • Mattoon, Ill.
  • Lufkin, Conroe, and Katy, Tex.
  • Suburban Pittsburgh, Pa.
FairPoint workers on strike in the fall of 2014. (Image: Labor Notes)

FairPoint workers on strike in the fall of 2014. (Image: Labor Notes)

FairPoint customers and state regulators in New England expressed concern about the transaction. After FairPoint acquired landlines formerly owned by Verizon Communications a decade ago, the transition was described as “disastrous” by regulators, who received scores of complaints about service and billing problems before FairPoint ultimately declared Chapter 11 bankruptcy, mired in debt.

After emerging from bankruptcy, FairPoint has endured union strikes and was assessed multiple fines for failing to meet service quality standards in Maine.

“The last time these assets were sold to FairPoint it was a disastrous outcome for Maine customers,” says Tim Schneider, Maine’s Public Advocate, who represents consumers on utility matters.

Schneider told Maine Public Radio he is planning to scrutinize the deal to prevent further problems, but customers in Maine, New Hampshire, and Vermont are already expressing concern regulators are just as likely to rubber stamp this sale just like the last one, further saddling them with problematic service.

The owners of Maglan Capital are pleased with themselves, tweeting out this is a “December to Remember.”

Search This Site:

Contributions:

Recent Comments:

  • chickenpatti13: I'm not going to be upset over loosing favorite channels.Once upon a time,there was no TV.I'll use all that free time to expand my farm.You can't wear...
  • DCUNY: 113/12 now in area of Hilton, NY. Was 70/6 last year or so....
  • Daniel Haro: no WORRIES FOR US IN San Antonio TX. Google FIBER HAS LAUNCH SHOULD BE AVAILABLE TO MOST OF San Antonio IN THE COMING MONTHS. WeCAN FINAL DITCH THIS P...
  • bc: woke up to 130/15 speeds this morning batavia ny 14020...
  • Racerbob: Confirmed upgrade here in West Webster. 60/5 is now 100/10 for me. http://beta.speedtest.net/result/6880083440.png...
  • Fred Pilot: Interesting that "the Internet" is still discussed as if it's something new circa early 1990s when in fact it's been widely available for some number ...
  • Don: I just got off the phone with Spectrum and I asked about the small speed increase. He said that I am part of the new lift area. He said that in my are...
  • Racerbob: A friend here in Webster started seeing 150 Mbps download speed yesterday. A chat with Spectrum today told him that more speed would be seen next week...
  • Don: I'm in Gates, New York and I'm on the ultra plan and my speeds were around 117/11.5 but now are showing around 141/11.5 but not sure why. The speed re...
  • Reuben Mahar: New Speeds are online in Waldoboro Maine. 04572. Testing at 112 x 11. I wonder if this has anything to do with LCI offering fiber in my area,,,,, ...
  • Peggy: Sorry to tell you but they set up the account based on your address, not your name. And the other thing is, it does depend not only on your address bu...
  • EJ: I am curious to see the specifics of this "DEAL". How bulletproof does this need to be, how much redundancy does there need to be, who decides what an...

Your Account:

%d bloggers like this: